The budget papers also tell a story about the management of the Defence workforce. When the 2012-13 budget was brought down in May of last year, the aim was to have 58,636 full-time ADF personnel. Clearly recruitment has failed to make up for separations, and the additional estimates figure in February this year was 56,751—a shortfall of 1,885 people. The ‘increase’ in full-time ADF personnel being reported this morning as a 2013-14 budget measure is in fact nothing more than a re-stating of last year’s failed aspiration.

Table 3. The Defence workforce

One final observation is the winding down of operations is showing up in the budget figures. Last year’s budget (as amended at additional estimates in February) included $1.530 billion for operations, including $1.190 billion for Operation Slipper in Afghanistan. This year’s estimate is $918.5 million, with Afghanistan accounting for $874.9 million.

But if there’s a lesson we can draw from the last three Defence budgets (or for that matter the overall federal budget), it’s that no government can tie the hands of the Treasurer who next steps up to the dispatch box on budget night. We can go through the entrails of this year’s budget if we want, but next year might see a completely different set of externalities, government priorities, or both. In many ways, this makes the business of planning for multi-year procurements of capabilities that will span decades extremely difficult. But it’s the form of executive government that we have, and all departments have to live with it.

Andrew Davies is a senior analyst for defence capability at ASPI and executive editor of The Strategist.

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The reality is that the long term budget outlook is still well short of the level of funding needed to deliver on the ambitious defence equipment plans articulated in the 2009 white paper as modified and added to by the 2013 effort. Beyond the forward estimates the government has provided what it describes as six years of ‘additional funding guidance’—in essence back of envelope advice saying there will be approximately $220 billion available between 2017–18 to 2022–23. Reading Stephen Smith’s budget overview statement it’s clear that the really big costs associated with the new submarine program and the Joint Strike Fighter acquisition only begin to bite within that time frame. But that little tail you see is actually attached to one really big dog, just panting outside of the six year guidance. If you buy the tail the rest of the dog won’t come for free.

Mark Thomson’s initial estimate is that defence spending will hover between 1.6 and 1.7% of GDP for the six years after 2016–17 in effect that means the ‘aspiration’ to lift defence spending to two per cent of GDP remains a very distant goal—as many as four federal elections away. The two percent figure is about as believable as the aspiration to acquire twelve submarines. The budget has the effect of delaying somewhat the inevitable day when hard decisions will have to be made between capability ambitions and financial realities, but that moment can’t be put off forever.

A small reduction of Defence public service numbers was expected, with 327 civilian staff cut, but there is also a massive increase of 1524 for the ADF. It will take closer analysis to understand why the ADF growth is necessary at a time when the three largest overseas operations are winding up. Long gone is that day when the quest for efficiencies means that ADF positions were civilianised to harvest cost savings in the order of 20 to 30%. Of course no government ever lost a vote cutting numbers of public servants, but the balance between APS and ADF is an important variable in any approach to making internal savings.

None of the above will have as much impact in Russell Hill as the result of two announcements that will presumably be cheered in the rest of the country. Finance Minister Penny Wong announced that in the quest for efficiency the amount of space allocated to public servants in new office space will be reduced from 16 to 14 square meters. Is that a cry of ‘if only’ I hear from across Lake Burley Griffin? The decision to tax car parking space within the Parliamentary Triangle will impact on some 9000 public servants and others including those at Russell Offices—to the tune of $11 dollars each a day. Will ADF personnel seek an exemption or a car parking allowance? Submarines may come and go, but car parking problems in Defence is the benchmark of worker satisfaction for much of Canberra—not that anyone outside the ACT will see that as a problem. See you on the buses!

Peter Jennings is Executive Director of the Australian Strategic Policy Institute. Image courtesy of Flickr user Michael Loke.

Note: a previous version of this post relied on news reporting, and has been amended to reflect the actual budget figures.

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The reason for this much reduced transparency is supposedly security related. I’m doubtful: if we were able to report the availability and sea days of our submarines when they were undertaking risky intelligence gathering missions, why can’t we know their availability today? Similarly, why is the availability of our frigates a national secret when the RAAF freely reports the number of flying hours achieved by its frontline fighters? If security really is the reason, as opposed to just wanting to avoid scrutiny, Andrew Davies’ revelations about Collins availability show that it’s not being implemented with much success.

But even using aggregate data the results aren’t encouraging, as the following three graphs show (click to enlarge). The targets for each category are as set in the budget for that year, and the actual figures are as reported in the Annual Report. While the best-fit line for the minor war vessels is of questionable meaning, the results for the other two categories are pretty clear about the trend.

Mark Thomson is senior analyst for defence economics at ASPI.

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Comparisons of defence spending between countries are even more fraught, buffeted as they are by ever-fluctuating exchange rates. Even within a single year, exchange rates can easily vary by 20%. Comparing defence spending between countries and over time is harder still because the already substantial vagaries of inflation and foreign exchange are compounded.

One way to avoid these complications is to calculate near-term rate of growth in defence spending. This works because inflation can be reasonably well (though still not uniquely) defined over the short to medium term. Knowing how much defence spending has risen or fallen over preceding years is useful information. Here in Australia, the figure of ‘3% real growth’ has become a talisman-like benchmark for the adequacy of defence spending since it was introduced in the 2000 Defence White Paper. If only it were that simple.

Expressing defence spending as a share of GDP (often termed ‘defence burden’) avoids a great many complications by calculating a dimensionless ratio, usually expressed as a percentage.

Defence burden allows comparisons between countries and over time without reference to tables of exchange rates or inflation indices. But as Neil pointed out, there are still complications—most especially the ebb and flow of economic growth. In a recession, it’s entirely possible for GDP share to rise even as defence spending falls. Yet GDP share is still a valuable measure because it serves as a proxy of the importance assigned to defence as a national priority. High levels of defence burden indicate that a high priority is being given to defence, and conversely so. A significant limitation of this measure, especially as a comparator, is that it provides no indication of the absolute size of defence spending. For example, the denizens of Tuvalu could spend 100% of GDP on defence and we’d know that they were deeply worried about something. But, in the absence of an extraordinary set of events, their US$37 million wouldn’t do them much good if they took on the United States which ‘only’ spends 4.5% of GDP—around a lazy US$500 billion.

Sometimes, though not frequently, GDP per-capita and/or defence spending per-capita are raised in discussions of a country’s defence effort. Apart from reminding voters of the substantial personal opportunity cost they incur as a result of defence spending, it’s not clear what’s achieved by doing so.

The final measure in common use is the percentage of the federal budget allocated to defence—Neil’s preferred option. As a comparative measure between countries, this measure suffers from the wide international variation in both the scale of government spending in absolute terms (and as a share of GDP) and the variable demarcation between federal, state and local spending. Even within a single country over time, there can be substantial variations due to policy choices that shift revenue and expenditure from the state to federal level, or which arise due to the shifting boundary between the private and public provision of services such as health, education and retirement savings.

The impact of shifts in spending between levels of government can be avoided by aggregating spending at all levels to yield what might be called a national budget, but no such approach is possible when it comes to the private–public split, short of going back to GDP share. And, as with GDP share, changes to the denominator (the size of the federal or national budget) can alter the result irrespective of what happens to defence spending.

As illuminating as the various measures of defence spending are, they all ultimately suffer from focusing on financial inputs rather than military outputs. So while these metrics can help to capture gross trends and perform broad comparisons, they fail to say anything about what we are getting for the vast amounts being spent. Or to put it differently, they tell us a lot about the opportunity cost that we are incurring but nothing about the benefits we hope to accrue as a result.

Mark Thomson is senior analyst for defence economics at ASPI.

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The key point to grasp is that the strategic need, or requirement, always comes first; the equipment is a secondary consideration. Now no one doubts a substantial submarine, capable of long-distance operations, would be extremely useful. But this doesn’t mean it’s vital. The problem is (and this is particularly the case given the current budgetary limitations) every government dollar can only be spent once.

That’s why the real question isn’t, ‘what sort of submarine should we buy’? Instead it becomes, ‘what provides the best value-for-money solution for our strategic need’? I’ve been really enthusiastic after listening to the case that’s being advanced for the replacement Collins. But the trouble is it doesn’t appear to address either the economic changes in the region or what our strategic needs might be in the decades 2020 through to 2040.

This assertion is based on two insights. Firstly, the size of our economy is declining by comparison with our neighbours. The contention that in ten years’ time we will be able to travel through Indonesian waters with insouciance, for example, brushes aside Jakarta’s development as if it’s irrelevant to the strategic situation. It’s not. The problem is these boats aren’t just being planned for operations within the decade—their operational timeframe is intended to last much longer. Any analyst who suggests that our vessels would be able to routinely operate in the South China Sea in 20 years time is obviously making some very courageous economic predictions. It would be interesting to know exactly how they justify their assumptions about the regional economic balance.

The second problem is technical; an assumption that large conventional submarines will continue to remain (relatively) invisible and irreplaceable for carrying out particular missions. Certainly this has been the case in the past and there are still many things that, until now, only submarines have been able to do. The pace of technical development is, however, extremely rapid. It appears foolish to assume that submarines will continue to be the only weapons systems that will be able to accomplish particular tasks in future.

The proudest boast of a submariner used to revolve around their ability to penetrate the screen surrounding a US carrier task force and sink the flagship. This has been something that no other weapon systems could achieve. Today, however, the Chinese navy is investigating the possibility of using waves of missiles to overwhelm traditional defences with greater probability of success and at far less cost. Submarines may still be able to accomplish tasks they are designed for, but that doesn’t mean there won’t be alternative methods of achieving the same objective that are cheaper and more efficacious.

Questioning the need for a new submarine isn’t a matter of doubting its effectiveness: it’s simply a matter of the ‘opportunity cost’ that might be involved in embarking on that particular voyage.

Nic Stuart is a columnist with the Canberra Times. Image courtesy of Department of Defence.

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Ray observed: ´The Government’s action will ensure that we retain superior strike and interdiction capability’. This was certainly true in relation to undercutting the Opposition’s imminent launch of a defence policy statement: A Strong Australia. The story is taken up by Mark Lax in his excellent history of the F111 in Australian service:

The first the RAAF knew was when Senator Ray called the Chief of the Air Staff, Air Marshal Ray Funnell, over to Parliament to inform him. Funnell was astounded when Prime Minister Keating announced he wanted to buy 52 F-111Gs. Funnell recalled: ‘my immediate thoughts were that the RAAF couldn’t handle such a number and, more importantly, what would the neighbours say’?

Australia eventually acquired eighteen aircraft and additional spares. The F-111Gs were 30 years old at that point and not easily compatible with the F-111Cs, but the decision helped to keep the capability in service to 2010.

The Howard Government made a significant number of short notice ministerially driven acquisitions. Three key decisions stand out: the C-17 Globemaster, the additional Army expansion announced in 2006 and the decision to acquire the Super Hornet.

The C-17 purchase was the result of creating an opportunity out of a problem. The opportunity was to take advantage of an existing US production run of military off the shelf (MOTS) aircraft; the problem was a looming major underspend of the Defence budget. Government completed both first and second pass approval for four aircraft and support systems in March 2006 for a cost of $1.8 billion. The aircraft were delivered on time and demonstrated their operational value in responding to the Japanese ‘triple crisis’ in March 2011. A fifth aircraft was ordered in April 2011 by the Labor Government, again taking advantage of a MOTS buy to soak up a budget underspend and negotiations for a sixth aircraft were announced in September that year, corresponding to—you guessed it—a third underspend, although the government has claimed that the two weren’t linked.

As the Audit Office dryly noted in its assessment of the C-17 project: ‘Considerable acceleration of the standard acquisition cycle is possible when the major supplies being procured are off-the-shelf production items’.  For Defence and for successive governments it was the prefect project: fast cash for a fine capability.

In August 2006, John Howard announced a major expansion to the size of the Army:

In order to fully meet future regional and global security challenges, the Government has decided to increase the size of the Army by two additional battalions. The Army will increase to eight battalions, with an additional 2600 soldiers recruited.

It was only six and a half years ago, but the regional security imperative for this $10 billion decision seemed more obvious then than now. Howard said the need for expansion was ‘self-evident’: ‘…this country faces ongoing and in my opinion, increasing instances of de-stabilised and failing states in our own region.’ Australia recommitted large numbers of troops to the International Stabilisation force in East Timor in 2006, redeployed troops to the Solomon Islands in April that year, and intervened in November to stabilise Tonga after rioting. That contrasts sharply with the assessment of a ‘more positive’ Pacific security outlook in the recent National Security Strategy. More prosaically, for Howard the mid-2000s was a time of major defence spending increases and the announcement a perfect way to demonstrate the government’s commitment to Defence.

In my next post I’ll take the story up to the present by looking at the Super Hornet decisions of 2007 and (possibly) 2013 as well as couple of other Ministerial ‘surprises’. What should be clear already is that not all ‘surprise from the skies’ decisions are bad, even though they may trash the lovingly crafted plans of the force structure developers, and determine the shape of the ADF for decades into the future.

Peter Jennings is executive director of the Australian Strategic Policy Institute. Image courtesy of Flickr user Leorex.

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Second, and probably more importantly for Australia, sequestration would only make Washington even more eager for its partners in the Asia–Pacific to step up and provide some of the resources required to execute the US rebalance. Already, with sequestration only a possibility, it’s clear to us that there’s disappointment in Washington about the allied response to date—and Australia has been mentioned in this respect more than once.

To be fair, it’s not a case of finger wagging or reprimanding, and Michael Green of CSIS provided the best one-liner of the week when he said that ‘Washington isn’t in a position to export political will at the moment, because there’s a deficit here as well’. Be that as it may, the fact is that America sees itself as the hardest working member of a team and it’s looking for a higher rate of effort from the rest.

For a variety of reasons, Australia is unlikely to significantly increase its defence budget in the near term. But there are some things we can do at relatively little cost that will have the dual benefit of making the US rebalance a little easier for them while providing us an excellent return on investment, in terms of both security and alliance good will.

Back in November 2011, President Obama announced that, as part of the rebalance, 2,500 USMC personnel would rotate through the North Territory on an ongoing basis. The footprint of such a force is substantial, and they’ll need facilities both for the Marines themselves, and also for the storage and maintenance of their equipment.

We’re in the early stages of building momentum in this initiative and it’s still very much a work in progress, with only 250 Marines involved in the first rotation. But the budget woes in Washington mean that the cost of proceeding is competing with a myriad of other calls on resources. The difficulty of getting that done has been mentioned to us more than once this week.

This is where the Australian Government could do its ally—and itself—a big favour by putting some money on the table to properly support the establishment and ongoing maintenance of the US training mission to Northern Australia. On the scale of defence expenditure it’s not a biggie, but it would send a clear signal that Australia is prepared to put some resources behind its public rhetoric in support of the rebalance.

That would make good sense for us strategically. An ongoing US presence in the Asia–Pacific is unambiguously in our interest; we get a security benefit from the alliance far in excess of our modest defence spending (presently 1.56% of GDP compared with America’s 4.7%). It follows that spending a little extra to help secure the presence of US forces in our region should be a no-brainer, even in a period of fiscal stringency.

Over forthcoming weeks, we’ll be running a series of posts based on various contributions to the Alliance 21 project.

Andrew Davies is a senior analyst for defence capability and executive editor of The Strategist, and Mark Thomson is senior analyst for defence economics at ASPI. Image courtesy of Department of Defence.

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So any future decision to scale back the size of submarines for reasons of reducing the cost and/or the engineering and project risk would cause a hit to capability. That needn’t be fatal to the cause of smaller submarines, as we’ll come back to later, but it has to be acknowledged. If we bought submarines smaller than the Collins, in some respects we’d have less capable submarines than we do now. Conversely, nuclear submarines have payload, range, speed and endurance capabilities greater than even the largest conventional submarines. If we could manage the very substantial difficulties we would have in acquiring and operating them, we’d end up with more submarine capability than we have now.

This actually brings us to several logical fallacies often seen in the public submarine debate. At one end, we find those who assert that off-the-shelf submarines could meet Australia’s strategic needs just as well as the larger Collins class.

That simply isn’t the case. The European submarines, for all of the reasons explained above, don’t have the same capabilities as larger boats. They offer a lower level of capability, albeit at a lower cost and much lower project risk, so the case for them necessarily has to be based on a different cost benefit calculus. At the other end, we find the argument that nuclear submarines offer too much capability for Australia.

The fact is that the more capable the submarine, the more military options it potentially  has. The trick of course is to work out how much it costs to get and maintain that capability in relation to the options it provides. Those costs are crucial, because they displace other military options within the defence budget, and other national options more generally. And that’s where our view and the SIA differed most noticeably. We didn’t accept that demonstrating the unique abilities of submarines and the relative effectiveness of large ones was sufficient to make a case for building  them. Nor do we accept that the unquestionably superior qualities of large submarines over small ones means that the latter should be ruled out.

Instead, we simply continue to argue that it’s necessary to have, on the one hand, the military options that submarines of different kinds provide and at least a qualitative understanding of the benefits they could bring in various scenarios. On the other hand, the costs need to be understood as well, and weighed against the potential benefits. The SIA have made this judgement and have come down on the side of large conventional submarines (PDF). We aren’t so sure that the case has been made. In a later post I’ll examine the questions that have to be answered to make the case as we see it.

Until then, here’s a simple way to understand that such a process is necessary, using the method of ‘limiting cases’. At one limit, if submarines were free, there’d be no trouble deciding to get some. After all, there’d be no opportunity cost, and the benefits they brought wouldn’t have to be likely to be required—we’d keep them around just in case they were useful. At the other limit, if they were a trillion dollars each we’d have little difficulty deciding that we’d live without their capabilities and find some other ways to insure our security through military and other means. The real world isn’t kind enough to present such idealised choices, of course. That’s why we have to think through our options and opportunity costs as carefully as possible.

Andrew Davies is a senior analyst for defence capability at ASPI and executive editor of The Strategist.

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In the surveillance role submarines are able to simultaneously observe activities under water, on the surface, in the air and over the electromagnetic spectrum, often in areas denied to other eyes and ears. Andrew suggested replacing them in the role with overt platforms such as satellites and unmanned aircraft. In fact, submarines complement those systems; not only do they not cover the underwater spectrum, but their presence can be observed/predicted and sensitive activities curtailed whilst they are present.

In the land strike role a submarine’s stealth enables it to covertly position precision land attack missiles without causing a diplomatic incident, retire if not required, or launch and withdraw. Andrew’s point about the reload time is valid. However, a large conventional submarine configured for a strike mission can certainly carry more than 12 missiles. In some cases, eg targeting a non-state actor, 12–20 missiles might be enough.

But strike is a long way up the spectrum of conflict. In situations short of conflict, Australia’s submarines are able to provide unique indications of another player’s long-term intentions, facilitating counter-measures via diplomacy and force preparation that will, hopefully, avoid an escalation to conflict.

There’s also a payoff in terms of alliance management—the United States has made it clear that it would value an Australian submarine force offering these capabilities.

In a short space it’s hard to do justice to the topic, but I want to say something about the prospect of an off-the-shelf purchase. To be able to exploit the initiative gained from their stealth, Australia’s submarines must be able to covertly reach sensitive areas throughout our region with sufficient mobility, endurance and payload for the long-duration missions involved, frequently in or through hot tropical waters. It’s worth understanding these terms, because they’re often misused or confused:

• Mobility is the capacity to complete the long transits required expeditiously and discreetly, ie with low chance of counter detection.

• Endurance is a combination of mobility (fuel and energy), habitability (food and crew support systems) and availability of sensor/platform systems (equipments, power, cooling, redundancy and onboard repair capability).
• Payload is the capacity/flexibility to carry/deploy sufficient crew and specialist personnel teams, a range of weapons and remotely operated vehicles/off-board sensors—the latter are the next capability frontier/force multiplier for submarines.

Taken in combination, this is a more demanding regime than maximum range frequently quoted in specifications or cited by advocates for European boats. Such figures tend to be based on a non-operational scenario, with transits completed at an optimum, low speed with prolonged and predictable periods for recharging batteries.

Habitability and crew size over the long missions are also important, not only for crew effectiveness, but also to ensure an acceptable quality of life for crews; a key factor in attracting and retaining personnel. The Submarine Institute of Australia has had a lot more to say about these issues and the mathematics of how many submarines we require in its submission to the 2009 Defence White Paper (PDF).

The importance of stealth can’t be understated and it underpins the strategic impact of Australia’s submarine capability. This enables access that confers significant initiative in the complex strategic environment ahead; and submarines are best employed proactively to exploit this. And, where appropriate, they can be employed offensively to maximise the benefits gained from this advantage. Submarines are the only weapons system in Australia’s ‘order of battle’ with this characteristic. They offer a unique range of options for future Australian governments.

Peter Briggs is a retired RAN submarine commanding officer, past President of the Submarine Institute of Australia and has provided input as a consultant, assisting in the development of Deep Blue Technology’s design capacity.  Peter has no current affiliations with any of the potential suppliers to meet the RAN’s SEA 1000 requirement. Image courtesy of UK Ministry of Defence.

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The turnover of the top 12 companies represent 80% of the 2011/12 value of the contracts being managed by Defence. Of the twelve, eight are the Australian arm of a larger international group, accounting for a 58.3% share. But of the four Australian companies, two are not providers of high-end capability products or services—John Holland Group is mostly involved in facilities works and Spotless provide maintenance services to Defence establishments around the country. That leaves only ASC—currently building the air warfare destroyers and maintaining the Collins class submarines—and Transfield Services (shipbuilding and maintenance and other services) as being involved in the delivery of capability at the ‘pointy end’.

So let’s get serious—we’re already deep into the world of non-sovereign defence capability. Those international firms are here because they provide the lion’s share of the ADF’s top-end capability. The AWDs, despite being built here, will have essentially no Australian sourced major mission systems. The fast jet air combat capability is basically a ‘turnkey’ acquisition these days. Army’s armed reconnaissance and mobility helicopters, artillery and armour are all imports. To the degree that we have a sovereign capability based on Australian sovereign industry today, it’s in the lower end of capabilities. Any real warfighting will require industrial and political support from third parties.

This isn’t an Australian unique phenomenon. The trend around the world is towards mergers of smaller companies into a shrinking number of major suppliers. This is being driven by the rising R&D and production costs that show little sign of slowing. Defence has to work within this reality and attempting to do otherwise is likely to be expensive and futile. A better question would be ‘is there a continued role for sovereign suppliers’? I would suggest that, with very few exceptions, the answer is ‘probably not’.

Consistent with that, Australian companies will increasingly have to align their skills with parent/partner companies overseas. We already have a lot of Australian companies benefitting from ‘reachback’ into companies based overseas (especially the US and UK). The good news is that the increased overall mass will make for a wider pool to draw from. The bad news is that we won’t ‘own’ many of the skill sets—but that’s increasingly the province of the very few countries still able to support the prodigious R&D costs of modern warfighting equipment.

In many ways, that should make it easier to manage any looming ‘skills gaps’. If we’re talking about the skills required to participate in a global supply chain, then the market should look after that. Either Australian companies will partner with offshore suppliers to provide a local workforce with the required expertise, or the offshore suppliers will provide an end-to-end service. Exactly how this works will depend on the relative cost of the two solutions (except when policy choices interfere with market conditions).

If, however, we’re talking about the skills required to ‘do it ourselves’, then that horse has mostly bolted. We have left a few things that have, for a variety of reasons (some good, some opportunistic and some just silly) been spared form the Darwinian process that has seen almost all our combat capability now depending on the knowhow and industrial expertise of others. One of the industries still clinging on is shipbuilding, so it’s worth a closer look at that.

I’ve written before on The Strategist about the looming skills gap in shipbuilding. (And Henry Ergas helpfully expanded on my remarks.) I’m unconvinced that it’s possible to fill that gap with anything like a sensible work program, and the odds are that we’ll still have to ramp up again, albeit from a higher base than might otherwise have been the case. The question becomes whether it’s more sensible to run down the workforce and then ramp up again, or to try to maintain a level of skill by doing projects that might not have made the cut purely on their own merits. Or, in other words, is the premium paid for building another vessel (or more) here a better business proposition than the additional costs of rebuilding skills later?

Here’s my recipe for industry or government worried about a skills gap: work out the business case. Do the sums and compare the costs and benefits of keeping a workable skill base in place versus ramping it up and down to meet intermittent demand. Like it or not, we have to be guided by the realities of the worldwide defence market and make good business decisions in that context.

Andrew Davies is a senior analyst for defence capability at ASPI and executive editor of The Strategist.

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To a very great extent, the United States Navy (and others) have managed to achieve that goal, which has created the environment for the great expansion in seaborne trade. The trouble is, most years there’s less of the USN to go around, but ever more shipping to be secured. And they can’t rely on help from other western nations to fill the gap. For example, the Royal Navy has declined from 234 combatants in 1960 to just 36 today. Of course, the capability of each warship today is greater than that of its predecessors (which is actually the problem, because increased capability comes at increased cost which reduces the numbers purchased) but they can still only be in one place at a time.

Sources: USN fleet data and Lloyd’s registry data via shipbuildinghistory.com

There are at least two consequences of the simultaneous decline of western fleets and rapid growth of world’s commercial fleet. Firstly, the security market will begin to find solutions other than relying on the ‘free good’ provided by naval forces. It’s not surprising that private enterprise has identified a market niche, and is now moving to exploit it using sophisticated commercial sensor and communication systems as well as their own vessels to assist in shepherding and convoying cargo vessels through dangerous waters.

The second consequence is that the global maritime commons will increasingly become a contested space. As the Center for a New American Security (CNAS) observed in a 2010 report (PDF):

[In the future] protecting open access to the global commons will be in high demand, but the capacity of the US military to protect the commons will be challenged by new commitments and an increasingly diverse set of military threats. The status quo, in which the United States is the sole guarantor of the openness of the global commons and other states free ride, is unsustainable.

Their policy prescription is for the United States to engage its friends and allies in redoubling efforts to bed down international agreements and arrangements that protect the commons as we currently understand it. But it’s hard to see how the trends at work can be reconciled. The WWII tactic of herding vital shipping across the Atlantic in convoys, with the unsophisticated submarines of the day snapping at their heels are long gone. Warships are fewer, vital shipping much more numerous and the stakes higher due to the economic interdependence all nations have thanks to globalisation. Finally, anti-access systems are becoming steadily more effective, making the task of protecting shipping more difficult and expensive—which is again likely to drive down the numbers of would-be escorts.

The net result is that I’m increasingly of the view that being able to secure shipping lanes for more than a tiny fraction of the world’s trade is fast becoming a thing of the past. The future is much more likely to see a number of nations possessing the capability to seriously disrupt global trade, and no one having the ability to effectively prevent it.

Andrew Davies is a senior analyst for defence capability at ASPI and executive editor of The Strategist.

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In each of the periods of fleet growth, American spending on defence as a proportion of GDP was increased for a few years. The second graph below shows real US defence spending indexed to the 1960 budget, on the same chart as the rising growth in the cost of naval vessels. During the Vietnam and Reagan years, the budget got ahead of the unit cost curve, allowing for an expansion of the Navy. After the end of the Cold War it fell well behind, hence the steady tailing off of the fleet size. The surge in spending since 2001 is a little misleading in this context, because a lot of it has gone into supporting two land wars and the USN has been only a modest beneficiary of the additional funds. In the years to come, it will be interesting to see if the focus on the predominantly maritime Asia-Pacific theatre and the associated AirSea Battle concept will see the USN bounce back. But in an era where ‘austerity’ seems to be the by-word, I wouldn’t be betting on it.

Source: US defence spending figures from Pentagon budget papers 2012 ‘Green Book’ (PDF).

Andrew Davies is a senior analyst for defence capability at ASPI and executive editor of The Strategist. Image courtesy of Flickr user Official US Navy Imagery.

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